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Government budget allocations for R&D (GBARD) in 2018

1. Context for research and development funding

Public funding of research and development (R&D) activities create preconditions for the renewal of the economy and industrial structure. The main reason for publicly funded R&D is its considerable social and financial externalities. Research and innovation (R&I) policy, in turn, strengthens international competitiveness, wellbeing of citizens and the preconditions for environmentally sustainable growth. The objective is to ensure sufficient R&D funding in key targets and actions that promote the economy and employment in the long term.

Policy measures are controlled by the national government programme and its key projects (2015 to 2019), as well as the policy of the Research and Innovation Council ¹⁾ (2015 to 2020). In the public finance plan for 2018 to 2021, the Government decided on revisions to the innovation systems and investment in strengthening R&D investments. Financing will be directed at key targets in terms of the economy that support renewal and growth.

2. General development of government R&D funding

The total budget appropriations and outlays for research and development in the 2018 budget amount to EUR 1,883.2 million. The appropriations increase by EUR 85.7 million from 2017, which translates to a 4.8 per cent nominal and 3.3 per cent real growth. The proportion of funds allocated to R&D activities of overall government spending exclusive of debt servicing is 3.5 per cent.

Even though government R&D funding grows slightly in 2018, the research intensity remains on last year's level as GDP grows faster than this. Thus, the GDP share of public R&D funding is an estimated ²⁾ 0.80 per cent in 2018. The GDP share of EU and OECD countries has been around 0.70 per cent in recent years.

Table 1. Central government R&D funding and its share in government expenditure in 2017 and 2018 ¹⁾

	EUR million	EUR million	Change %
	2017	2018	EUR million	Nom. %	Real. %
Total R&D funding	1 797,5	1 883,2	85,7	4,8	3,3
Total Central government expenditure	55 236,0	55 675,0	438,5	0,8	0,0
Central government expenditure excluding debt servicing	53 929,0	54 443,0	514,0	1,0	0,2
R&D funding share of Central government expenditure (excluding debt servicing)	3,3	3,5

1) The data of both years are based on the budgets and do not cover supplementary budgets etc.

3. Funding of research and development activities by administrative sector

Among administrative sectors, research and development activities are financed most in the Ministry of Education and Culture, EUR 1,164.4 million in total. The research funding of the Ministry of Education and Culture corresponds with over 60 per cent of the entire government R&D funding. The appropriations of the administrative sector increase by EUR 41.1 million, a majority of which is the result of growth in the R&D funding of universities and universities of applied sciences. The R&D funding of the Ministry of Economic Affairs and Employment also grows, by EUR 61.9 million which is mainly caused by the increase in the R&D funding of Business Finland. Among other important administrative sectors in terms of R&D funding, for example, the R&D funding of the Ministry of Agriculture and Forestry decreases by EUR 16.4 million, and that of the Ministry of Social Affairs and Health by EUR 5.5 million in the 2018 budget.

The ministries that hand out most R&D funding, the Ministry of Education and Culture and the Ministry of Economic Affairs and Employment, are also the most R&D intensive ministries. In all, 17.7 per cent of the Ministry of Education and Culture’s expenditure and 17.3 per cent of the Ministry of Economic Affairs and Employment’s expenditure are directed at research and development activities. The average R&D intensity of administrative sectors in 2018 is 3.5. The Ministry of Finance and the Ministry of the Interior have the lowest R&D intensities.

4. R&D funding by organisation

The funding for Business Finland’s (former Tekes) R&D activities grows by an estimated 21 per cent to EUR 391.3 million. The growth is the result of both increased appropriations and a bigger emphasis on the funding of research and development activities. The appropriations used by the Academy of Finland on research decrease by EUR 5.4 million to EUR 444.1 million.

Universities' research activities are financed with EUR 615.6 million. Universities have the highest proportion of the total government R&D funding, around 33 per cent. The share of the Academy of Finland is 24 per cent and that of Business Finland is 21 per cent of the entire government R&D funding. Central government research institutes get ten per cent and the share of funding divided between other administration is nine per cent. The R&D funding of universities of applied sciences is EUR 66.3 million in the 2018 budget, which corresponds with a share of around four per cent of government R&D funding. Among organisations, university central hospitals receive the smallest share of around one per cent.

In addition to appropriations from the Ministry of Social Affairs and Health, Finland’s five university special catchment areas also receive funding from other sources. The university special catchment areas coordinate the funding of research projects in their hospital district and receive funding from municipalities as membership subscriptions that are used for R&D activities. As a separate item from the national budget, university special catchment areas reserve total around EUR 27.1 million in their own budget for health research in 2018

5. R&D funding by socioeconomic objectives

A majority of government R&D funding is directed to universities’ research and development activities and general advancement of science. Research funding directed at promoting industry grows by EUR 102.3 million to EUR 303.4 million in the 2018 budget. R&D funding allocated to the health care objective category decreases to one-half from one year ago and totals EUR 51.2 million in 2018.

In other objective categories, the R&D funding allocated to energy decreases by EUR 19.3 million amounting to EUR 42.4 million in the 2018 budget. The appropriations for, e.g. the objective categories environmental protection and land use, transport systems and other infrastructure grow from the budget one year ago.

Figure 1. Government budget allocations for R&D in 2017 to 2018 by socioeconomic objective

6. Transnationally co-ordinated R&D activities

R&D funding directed at international research organisations or international R&D programmes ³⁾ is EUR 86.0 million in the 2018 government budget. International R&D funding remained almost at the same level as last year. EUR 52.5 million are allocated to Europe wide R&D programmes between countries that are arranged, for example, within the framework of H2020 (Horizon 2020 The EU Framework Programme for Research and Innovation). European international research organisations, such as CERN, the European Organization for Nuclear Research receive EUR 19.2 million in research funding from the government budget. Slightly over EUR ten million are directed at bilateral and multilateral R&D programmes between the governments of EU countries, which include, for example, joint Nordic research funding. In total, these EUR 82.2 million implement the so-called European research area ERA concept, whose aim is to develop the research of certain technologies in EU Member States from nation state based to Europe wide. The remaining EUR 3.9 million are directed at other international players for projects that have no ERA dimension. The total sum of government funding for internationally coordinated research and development activities has remained at the same level in recent years.

7. R&D funding of government research institutes

The main task of government research institutes ⁴⁾ is to acquire, produce and disseminate data as basis for political decision-making and development of society. In addition to research duties, the institutes have a varying number of different expertise, supervision, training, guidance and other official functions, charged and other service activities and so on. Research institutes produce services horizontally to many different administrative branches and the rest of the public sector, as well as enterprises and third sector operators.

In addition to budget appropriations, the R&D activities of research institutes is financed by external funding consisting of income from charged services and funding from elsewhere than the institute's own budget classes. External funding mainly comes on a competitive basis from several sources and from both domestic public and private sectors and international sources. Its amount is based on the institutes’ performance targets and is thus estimated.

Budget funded R&D activities of government research institutes

The total amount of R&D funding for research institutes from their own administrative branches’ budgets for 2018 was EUR 189.1 million. Budget funding decreased by around three per cent or EUR 6.1 million from the 2017 budget. Among research institutes, most funds for R&D activities was received by VTT, the Technical Research Centre of Finland and the Natural Resources Institute Finland, LUKE. LUKE’s R&D funding grew by EUR one million and VTT’s declined by EUR 0.5 million from the 2017 budget.

Total research funding and EU funding of research institutes

Total R&D funding for research institutes (budget funding and external funding) is EUR 453.9 million in 2018, which is nearly EUR ten million less than in 2017. The share of external financing is nearly 60 per cent of research institutes’ total funding. VTT, the Technical Research Centre of Finland received most external funding, the external funding share of VTT is close on 70 per cent.

EUR 264.8 million of research institutes’ total research and development activity funding is funding from outside the government budget. The amount of external financing decreased by EUR 3.8 million from the 2017 budget. Research institutes estimate that they will receive EUR 52.9 million in research funding from the EU, which is EUR 0.8 million more than one year ago. VTT’s share of EU funding is the largest, EUR 32 million.

Research institutes’ R&D funding by administrative sector

The research intensity of administrative sectors can, next to the funding share of actual R&D activities also be assessed by how significant a role research institutes have in the activities of each administrative branch. The social role of the administrative sectors of universities and the Ministry of Education in the field of science and research is qualitatively different and, thus, they are not included in the comparison.

An average of 31 per cent of the R&D funds of the key administrative sectors in terms of research activities is spent in their research institutes. The most research intensive administrative sectors in 2018 are the Ministry of Agriculture and Forestry and the Ministry of Transport and Communications. The Ministry of Economic Affairs and Employment, a majority of whose R&D funding is Business Finland’s funding, in turn, has the lowest research intensity.

1) Inventive Finland: direction for the research and innovation policy for 2015 to 2020 Research and Innovation Council 5 November 2014.
2) GDP 2017 and 2018, Ministry of Finance’s estimates.
3) Programmes or organisations where research and development (R&D) is the main type of activity.
4) Incl. the non-profit special assignment state enterprise VTT Oy.

Source: Government R&D funding in the state budget 2018, Statistics Finland

Inquiries: Heidi Pirkola 029 551 3246, tiede.teknologia@stat.fi

Director in charge: Sami Saarikivi

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Updated 22.2.2018